If Iran gets a nuclear weapon, may we see the end of a sluggish economy and enter into prosperity.

Okay, lets start off by saying that if Iran gets a nuclear weapon we probably have bigger issues – such as a major war, or having nuclear weapons move into the hands of terrorists. But assuming these weren’t an issue, could Iran’s building of a nuclear weapon be an economic sanctuary?

We already covered why a nuclear Iran may not be that bad in the region, although I remain skeptical about its positive potential.

One claim is that if Iran obtains a nuclear weapon, other middle eastern countries such as Saudi Arabia and Jordan might escalate their weaponization. While I don’t think it is likely to see other countries seek to “nuclearize” as a result, increased weaponization might result – so lets examine what might happen for the US economy.

Please note we are assuming that these countries will weaponize, continue to purchase from the United States, and will increase their spending by 50% year over year for a period of 3 years. We do not account for payments of intelligence, black market or second party arms sales, or anything else that increases operational capacity such as machinery and logistical products.

Every middle eastern country with exception of Sudan, Libya, Syria, and Iran made arms purchases from the United States in 2009. This accounted for roughly 50% of all arms sales. 2011 USA sales topped $66 billion. Assuming the Middle East’s proportion of purchasing was the same, we can safely assume that sales were not less than $33 billion. Given the very large arms trading announcements that have been made in the middle east, the current percentage may be well above 50% this year.

In the year following nuclearization, we can expect arms sales in the Middle East to increase to $50 billion dollars, 2 years, $75 billion, and the third $102.5 billion. Over the three years the purchase of arms would have resulted in a roughly 1% increase in our GDP… Yes only a percent, and averaged out roughly .33% per year. That being said, .33% is still significant, especially when we are currently looking at a 2% level of growth. The different may be quite significant.

I have to say again, this is strictly speculation – the effect may be larger or smaller than this – but now you have an idea.